Cash ISA rates begin to rise

Interest rates on cash ISAs are finally starting to increase after years of low rates, according to a report by data provider Moneyfacts.

The report showed that average rates for instant access ISAs went up from 0.68% in December 2017 to 0.78% in February 2018.

Long-term fixed-rate ISAs also increased from 1.38% to 1.46% over the same time. Over the last decade, low interest rates have seen ISAs lose popularity among savers. In the 2016/17 tax year, the number of cash ISAs that were opened decreased by 16% on the previous year.

However, it’s possible that rate rises could improve prospects for ISA savers in the future.

While the Bank of England held the interest rate at 0.5% in February 2018, it hinted that rates may need to rise “somewhat earlier and by a somewhat greater extent” than previously anticipated.

Charlotte Nelson, finance expert at Moneyfacts, said:

ISA savers will be disappointed to find that while we have seen an upturn in rates, ISA returns have yet to recover from the base rate cut in 2016.

Yet with multiple base rate rises now on the horizon, it is important that savers think about using their ISA allowance.